Chuan Hup - latest development
As you might already know, I participate quite actively in wallstraits.com forum. The following is an extract of my posting about the latest development on Chuan Hup....
Originally posted by Old Friend
Hi Limfuchin san,
Understand from your previous post or your website that Chuan Hup is still undervalued at 34cts. Now, with a takeover offer at 34cts on the table (see attached link), what is your views on Chuan Hup now?
Thanks in advance! :)
Dear Old Friend,
Thanks for the note.I was wondering why it halted trading, could be good news or bad news, right?
Then began my adventure....
Firstly, what I did was to do a rojak analysis comparing to its competitors (I used Courage Marine, Samudera Shipping and Singapore Shipping). It is really at face value, as in I look at only the competitors' P/E and book value.
The conclusion is quite sad... I find its comparative fair value to be only $0.21. Not wanting to give up, I dig up on the "Available-for-sale investment", which looks like a 'suspect' of hidden value. In its 2006 report, it is stated as US$218.151 mil.
When I dig further, oh my god, I do not remember that it has so many associated and subsidary companies! Directly held by the company is already 23 of them (I suspect some are just dormant companies) ! So, I zoomed in to those that I can find more and found these 3... PCI(32.69%), CH Offshore(32.12%) and Scomi Marine(28.92%).
To cut the story short, the combined net asset value of the 3 companies above is already US$214.42! Ya, so what right?
So, assuming that most of its *non-dormant* associated and subsidary companies are profitable, I highly suspect that its statement of US$218.151 is now very much undervalued.
The next question is, it is understated by how much? Due to lack of experience and knowledge, I am unable to give an accurate estimate... However, a simple simulation show that, for every US$100mil of understatement of its investment, its per share net asset value will go up by US$0.09. Also, all the 3 companies listed above are making monies...
My final opinion is that it should be worth more that $0.34... its most recent declared net asset value is US$0.2692 (about SG$0.4038)....
So, what do you guys think leh?
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